A tax aware investment approach has two clear goals - to minimise tax drag and maximise after-tax wealth for investors.
Australia has relatively high rates of personal tax. Personal tax revenue accounted for 42% of all tax revenue collected in Australia in 2019 - above the OECD average of 23%1.
Today's investment bond provider can substantially cut the effective rate of tax paid by the fund. In some cases, the effective long-term tax rate can drop to as little as 10%2, which is well below even the 15% that applies to superannuation funds.
Tax aware investing swings the pendulum in an investor's favour. If you reduce only 1% of your earnings a year that are subject to tax, it is estimated that you will have over 85% in extra return in a 15-year period using a global shares portfolio3.
Download the free guide to:
Understand how tax aware investing works and who can benefit from it
Identify potential costs of tax aware investing
Learn about how tax aware investing can achieve a variety of goals
Subscribe to Financial Standard's daily newsletter and FS Advice's weekly newsletter for more insights focused on Australia's evolving wealth management and financial planning industry.
1 Revenue Statistics in Asia and the Pacific: Key findings for Australia, OECD, 2022 2 Indicative forecast effective tax rates. The effective average tax rates represent the estimated forecast average annual tax as a percentage of earnings for each 12-month period over a forecast period of 15 years. Actual tax amounts payable are not guaranteed and may vary from year to year based on the earnings of an investment option. 3 Using the average annual MSCI World ex-Australia (with net dividends reinvested) in Australian dollars Index return over the 10 year period to 31 January 2023.